The Rise in Build-to-Rent Communities

I grew up in the suburbs of Boston. Every morning, on my way to elementary school, I walked from my 1950s tract neighborhood past a cluster of derelict tenements where a carpet factory housed their workers. The factory had only just closed, and these rundown buildings made a graceless transformation into apartment buildings; even today, this remains a neglected part of town.

The tenement was my first experience with a build-to-rent (BTR) community. Although we are not talking about employer-owned housing in this article, similar economic circumstances are at play in creating a situation where real estate ownership has been concentrated in the hands of a wealthy investor class, spawning whole new financial industries in the process.

That’s the bad news — owning a single-family home has become a less attainable goal for many Americans, with owner occupancy stuck at just under two-thirds. 

However, if you are a real estate investor looking to expand your portfolio or you have decided to wean yourself from homeownership as a retirement vehicle, there are real advantages. This article examines how build-to-rent communities can work for you. 

What Are Build-to-Rent Communities?

BTR communities are a combination of good old apartment complexes and the sort of mixed-use community that has sprung up in many parts of the country.

A “mixed use” community is, generally speaking, new build construction designed to approximate a real village, with retail stores, restaurants, and a mix of housing — single-family homes, apartments, and townhomes. Mixed-use communities are desirable in sprawling urban areas because they increase walkability and a sense of belonging to a centralized place, a neighborhood with its own vibe. Because the construction tends to be new, mixed-use housing has popular amenities and none of the hassles that come with older properties. In many cases, prospective owners can decide on floor plans and finishes before they move in. 

BTR communities are developed with some of the same principles in mind — convenience, walkability, and access to popular amenities. 

The main difference, of course, is the BTR communities will never be on the market. Instead, their focus is on offering a high level of professional management so that residents don’t have to worry about the hassles of home ownership. Unlike apartment complexes, BTR communities offer more of a “real home” experience, including the opportunity to live in a single-family home with a yard. 

Why Are BTR Communities Gaining in Popularity?

One of the main differences between citizens of the United States and folks in other developed parts of the world is the expectation that Americans will own their own homes. Renting not only bears a cultural stigma, it also fails to confer important tax advantages or to give Americans the nest egg that so many need to retire comfortably. 

And yet, the main reason for the rise of BTR communities is the lack of affordable housing. According to the National Low Income Housing Coalition, 6.8 million affordable housing units would have to be built in order to meet the critical needs of America’s neediest families. 

Even among individuals who are not low-income, surging mortgage rates and the inability to save enough for a downpayment make first-time homeownership difficult. For people with neither the time nor the inclination to work on improving a distressed property, the shiny new features associated with BTR communities are an attractive, “move-in ready” option until one has saved up enough money to buy.

Other reasons for choosing BTR over conventional homeownership:

• They can be a good option for people who wish to live in urban areas where homes are particularly unaffordable. 
• They can be a practical alternative for “empty nesters” who want to downsize and leave the upkeep to someone else. 
• They may appeal to younger generations who are postponing homeownership yet want to start families in a space that is more conducive to raising children, with more living space, no shared wall, and a private yard. 

BTR developments comprised 12% of the US market in 2023 — not bad for an industry that really only gained popularity since the pandemic. 

Is Living in a BTR Community the Right Move?

As I pointed out above, the main reason homeownership is important to Americans is that it’s our primary investment vehicle. In fact, “homeownership” has evolved into a single word, showing how closely we equate property ownership with the concept of “home.” 

But if you are in a position to save independently for retirement and other expenses, a BTR community can provide the best of both worlds. They are designed for long-term living, so you can make them your home. Unlike the single-family home you might be able to rent from a homeowner, it is a more stable arrangement — no one is going to kick you out because they want to sell the property or rent it to a friend of theirs, for instance. 

Another advantage of living in a BTR community is it includes shared amenities, such as exercise facilities and green space. For people with declining mobility who still want to live in an urban area, BTR communities make a lot of sense.

What Is the Future of BTR?

BTR has passed its initial concept phase, demand is high, and most analysts expect it to be a robust industry going forward. According to Callum Parrott, a BTR specialist quoted in a recent piece for Builder, “Institutional capital is interested in [this] asset class given the strong long-term fundamentals with BTR filling a need in the market and [housing] supply dropping in the near term.” 

However, it’s important to realize that since BTR is a relatively new asset class, it will take some time for the market to recognize it as independent from, say, multifamily properties. 

There are other short-term roadblocks as well. Due to the popularity of BTR projects in some areas — there are many more projects in the Sunbelt States and the West than elsewhere in the country — there is already some market saturation locally. Continued disruption to the supply chain and the higher cost of construction materials may also stymie growth. 

Significantly, frozen capital markets presented a problem to would-be development projects in 2024, stalling a number of them. An excellent Forbes article points out that BTR starts fell by 38% between the first quarter of 2024 and the first quarter of 2025. The same article suggests that housing demand will drive the resurgence of the market.   

Several analysts have concluded that lower federal interest rates could give the green light to the BTR industry, but even if we have protracted economic pain before that can happen, market forces will drive the expansion of BTR.   

How Can You Invest in BTR?

Well, you can build a project yourself. An article published in the National Association of Realtors Magazine begins with the story of broker-owner Elizabeth Campbell-Chase, who attended a lecture about the advantages of building single-family homes to rent, then went on to build seven single-family units on an acre of land. 

Few people have access to the kind of capital required for a real estate development project — even a small one — so another option is to invest in a BTR syndication project. Real estate syndication is when investors pool their money together to fund a particular project which is professionally managed. Because you are not involved in the day-to-day operations of the project, it won’t be a time drain. In the end, you will receive rental income and a lump sum when the project is sold, plus a periodic share of rental income once the project is stabilized. 

I could not find much information about fractional investment in existing BTR projects; my guess is the industry is too new. Aside from buying stock in publicly traded companies that develop build-to-rent communities, your best bet for getting into this industry as an investor is to take an active role in making one happen.

Some Concluding Thoughts

I began this piece by painting a stark picture of an old-school model — companies that cut corners by providing their workers with substandard housing so that they can pay them substandard wages. The inevitable rise of BTR communities conjures a similar spectacle of greed, removing homeownership from the grasp of many Americans and forcing them to live as renters, as the solution to a problem caused by skyrocketing mortgage rates and a lack of affordable housing.

Ultimately, I don’t think this is an apt comparison because the U.S. is a changing economy with a resilient spirit. A BTR community offers individuals the freedom to structure life around something other than homeownership, which requires time and effort (says the person who just bought toilet tank parts and has to do some plumbing herself because there is a huge shortage of tradespeople where I live).

Once you shift away from that homeownership paradigm, you can either devote part of your time to investing for the future, or you can hire a professional to do it for you. 

Meanwhile, as an investor brave enough to dive into an industry with proven need at a time when money supplies are tight, BTR could be a golden opportunity if planned with an eye to stemming the high cost of construction. Creative, sustainable design in markets not currently in the BTR game — for instance, the Northeast — could be profitable. 

Looking for the Perfect Spot or Funding for Your BTR Community?

Dealstream can help. Their proprietary search engine, comprehensive list of deals, and exposure to funding sources make it easy to find your next opportunity.